Jefferson City chamber promotes local growth strategy as state government stagnates

Ralph Kalberloh chuckles remembering a discussion that took place four decades ago when he was heading the Chamber of Commerce and Jefferson City was about to land its largest private employer.

Kalberloh, a retired association executive, was having lunch at the Jefferson City Country Club with the president of Scholastic Inc., who was stunned by the fact that members didn’t need to reserve a tee time to play golf. Regardless (or because) of the small city’s relaxed atmosphere, the president agreed to locate the company’s regional distribution center here.
That same year, Unilever—then known as Chesebrough-Pond’s—agreed to build a manufacturing plant in Jefferson City. Shortly before, the head of International Shoe, a local native, decided to locate the company’s regional distribution center here. Von Hoffman Press adopted its name and moved to its current location shortly after.

The year – 1966 – was golden. While large private employers were discovering the city, Lyndon B. Johnson’s Great Society poured money and jobs into state government— long before the country soured on the Vietnam conflict and riots scarred city streets. Only the Roaring ’20s, just after the burned Capitol was rebuilt, outdistanced the ’60s as a growth period for the capital city.

The city’s population soared 15 percent in the 1960s. The Whitton Expressway changed the contours of the central city, and the western reaches of Jefferson City, in effect, were born.

Forty years later, area leaders – from the Chamber to the courthouse and city hall – are gearing up to try to recreate those glory days, although state government will play a lesser role.

Recently, Gov. Matt Blunt told Mayor John Landwehr that he expects to maintain a cap of 60,000 on state government employment statewide – lower than the payroll eight years ago.

“Zero growth,” Landwehr said. “That’s the reality we’re facing” from state government.

Jefferson City will need to look elsewhere for an engine of economic growth.

The city smells the coffee

Business and civic leaders say the “complacency” about the city’s reliance on state government has ended.

Larry Schepers, a retired banker who headed the city’s first economic development advisory board when it was formed in 2003, said, “There was a certain level of complacency because we had always had such a stable environment. The urgency (to attract new business) was not as great as it should have been.”

After the ’60s, there were occasional upticks in economic development. In 1972, Westinghouse – now ABB – opened its large plant north of the Missouri River. In 1983, Scholastic upgraded its facility here from Midwest distribution center to national headquarters and began attracting printers and other suppliers for support.

City leaders say that during the 1990s, the state’s annual budget became the city’s annual economic development plan. They’re only half joking. Under the late Gov. Mel Carnahan, the city more than doubled its growth rate as state employment expanded steadily.

In the late 1990s, during the dot-com boom, the state cut taxes by almost $1 billion. That revenue loss, combined with the stock market collapse of 2001, led to hiring freezes, travel bans, layoffs and no raises for state employees in 2001 and 2002.

By 2004, Missouri state government employees ranked last in the country – behind Mississippi and Arkansas – for average wages. In 2005, there were no raises again.

As one of the 10 smallest state capitals, Jefferson City had no buffer from the financial troubles of state government. About one-third of its employment base was devoted to “public administration” – a concentration more than six times higher than the national average.

A March 2005 study for the chamber found that Cole County had lost 767 jobs in state government since 2001. The study also found that state wages for the average worker rose 6 percent during that time, but raises still lagged well behind national levels.

When a young, anti-tax Republican was elected governor in 2004 with the state budget badly out of balance, city leaders feared there would be major, permanent job reductions. Instead, there were scattered layoffs, attrition and elimination of unfilled positions, along with cuts in Medicaid.

But after four years of steady decline, the mindset of business leaders already had changed, and most were prepared to shed the city’s “one-horse town” image that smaller state capitals shared.

“State government was such a big part of our economy that being complacent was a problem to overcome,” says Mark Johnson of Central Bank, a chamber chairman in the 1990s who now sits on the board. “But I can’t believe it is a current problem. All you have to read is the population growth figures for Cole County,” which showed only a 1.9 percent rise since the 2000 census.

Added Chris Wrigley, Western District county commissioner and former lobbyist for Associated Industries of Missouri: “The local chamber correctly has revised its vision. State government is no longer a growth industry.”

Dot Baker, who just finished her term as the chamber chair, said “state government has been a great anchor for us.” But she said the chamber “put a lot of emphasis” on finding someone who could lead Jefferson City into diversification when seeking a new president – a fulltime paid position – in 2005.

Randy Allen, who got the job, recalls that expanding Jefferson City’s economic base was the “hot topic” in 2005 when he was interviewed and selected from a group of 37 applicants. Referring to the recurrent budget cuts and downsizing, he said: “You get fat and sassy. Sometimes, you need a wake-up call” like the city got with downsizing.

His selection as president seemed ironic. To guide the city’s
largest business organization in diversifying the local economy, the chamber turned to someone who had just served as the state’s assistant commissioner of administration and director of design and construction. But Allen also was the co-owner of a local business, Architects Alliance, and was chairman of the chamber in 1982.

Under Allen’s leadership, the chamber retained Market Street Services Inc. of Atlanta to develop the area’s first true economic development plan since 1986. Besides targeting largely white-collar industries that fit with the city’s government focus, the plan squarely aimed at making the area a more attractive place for people to relocate – a key feature for a community with a tight labor force.

Jefferson City also began building its first economic development staff at the chamber to serve both the city and Cole County, with the three entities sharing the cost and planning to triple the investment. Missy Bonnot, the chamber’s vice president for economic development, joked that she had operated as a “party of one” since she was hired in 2003.

By this spring Bonnot should have three professional assistants in various specialties. The county already has approved increased funding for the effort while a request is pending with the city.

Chamber of Commerce Chairman Bernie Fechtel, whose family owns a beverage distributorship, marvels at the sheer volume of civic and business projects that suddenly have gained new life – with some, like riverfront development, dating back a century.

“The pots have been simmering on the stove, and now the heat has been turned up,” says Fechtel, who moved into the chairmanship after service as head of the chamber’s economic development committee.

Breaking the mold

Jefferson City’s strengths are well known, and the Market Street group uncovered relatively few hidden assets.

Veteran business leaders like Schepers can tick off the strong points with no preparation: highly regarded public and parochial school systems, no traffic jams and minimal commuting time, low cost of living and taxes, a small-town atmosphere, a strong park system with a permanent funding base, a low crime rate, and a highly educated work force with a strong work ethic.

The disadvantages, principally in transportation, are just as obvious. Jefferson City is one of five state capitals not located on an interstate highway. The city has no air service except for private planes.

A less obvious disadvantage is the dearth of workers for relocating businesses. Thanks largely to the stable work force in state government, Cole County’s unemployment rate almost invariably sinks lower than state and national averages. In May 2006, the unemployment rate was 3.3 percent in the county, compared to 4.2 percent in Missouri and 4.4 percent in the nation. The area has precious few workers available.

The problem dates back decades in Jefferson City. Kalberloh recalls that the heydays of 1960s economic expansion ended because “we used up the labor force.”

Allen referred to the labor pool as the capital’s “Catch 22” problem: “You’ve got to have the jobs before the people will come, and you need to have the people to get the companies.”

Much of the Market Street report focused on how to make Jefferson City a more enticing place to live and work –redeveloping social, retail and cultural opportunities in the central city and opening up leadership opportunities to more young professionals, women and minorities.

“I think our community is ready to do some new things and change some of the things we’ve been doing,” Landwehr said. “We have to do a better job at redeveloping our core city. We’ve been good at new subdivisions, but in the last five years, reality has sunk in” in the older part of Jefferson City.
Included in the projects Landwehr is pursuing and Market Street all but endorsed:

• Downtown revitalization. Market Street consultants noted that young professionals have a decided preference for distinctive, pedestrian-oriented downtowns that are destinations—sites with 24-hour activity, art galleries, boutiques, bars and restaurants.

• The Missouri State Penitentiary redevelopment. The 142 acres along the river that once housed the state penitentiary offers the community property close enough to downtown to enhance the city core and surrounding neighborhoods. So far, only public building projects – the state natural resources building, state health lab and federal courthouse – have laid plans or finished construction. State officials are still debating brokering sites for private businesses. Landwehr, among others, expects development to proceed relatively slowly until a major interchange connects Highway 50 and the site in 2011.

• Riverfront development. One hundred years or more after the idea was broached, Jefferson City is still figuring out how to get people across the Union Pacific tracks to Adrian’s Island and open up a swath of land for recreation and other activity, just as other cities up and down the river have done.

• The convention center, an idea on and off for 50 years. Landwehr continues to hustle the convention center concept as a way to draw meetings and visitors to the capital center and infuse money and people into downtown.

The projects – which have been talking points for generations of Jefferson City residents – suddenly have crowded the public agenda at once but, except for the prison redevelopment, have few tangible signs of progress. One of the three new professionals the chamber will hire – the community development specialist – will help get these center-city projects off the ground.

“Other communities are spending a half million to three-quarter million dollars a year on economic development work,” said Wrigley, who supported the increased county contract. “We need to get up to the plate and play the game the way it needs to
be done.”